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Asian stocks tumbled Tuesday, with Japan's benchmark losing more than 2 percent, as Royal Bank of Scotland's massive loss renewed jitters about the health of global banks amid a protracted economic slump.

Markets throughout the region sank following news Monday that the RBS expects a loss of 28 billion pounds ($41.3 billion) for 2008 — the biggest loss ever reported by a British company.

Sentiment had turned slightly positive recently on optimism that an Obama administration would act aggressively to bolster the faltering American economy.

But European markets fell sharply overnight, with investors also spooked by fears that the British government's plans for a second financial sector bailout in three months could lead to the full nationalization of one or more banks. Worries that other governments will have to step in to save their leading financial institutions added to negative climate.

Markets were now bracing for a second wave of banking crises, fearing that many ailing banks have grown "too big" for governments to effectively handle, said Francis Lun, general manager at Fulbright Securities in Hong Kong.

"The results by Citigroup, Bank of America and RBS send a wake-up call to the treasury secretaries of the world that nothing really worked," Lun said, referring to already announced measures to prop up lenders. "Now we're almost back to square one."

In Japan, investors reacted to news that Toyota Motor Corp.'s worldwide sales fell 4 percent in 2008 amid the global downturn. After the market closed, Toyota announced that Akio Toyoda, grandson of the company's founder, was taking over as the automaker's new president.

Japan's Nikkei 225 stock average was down 2.3 percent at 8,067.22, paring losses after dipping under the key 8,000-level during the morning session. Toyota shares bucked the trend, rising 2.3 percent.

In Tokyo, Mizuho Financial Group Inc. fell 4.9 percent and Sumitomo Mitsui Financial Group Inc. was down 3.8 percent.

HSBC Holdings PLC led declines in Hong Kong banking shares, with the London-based lender falling 6.9 percent in Hong Kong trade. HSBC, hit with a series of analyst downgrades over worries about its capitalization, said Monday it wouldn't need aid from the British government.